Environmental Cleanup: Transfer of Contaminated Federal Property
and Recovery of Cleanup Costs (16-SEP-05, GAO-05-1011R).
Ammonium perchlorate (perchlorate) is a primary ingredient in
solid rocket propellant and has been used for decades by the
Department of Defense (DOD), the National Aeronautics and Space
Administration, and the defense industry in the manufacturing,
testing, and firing of rockets and missiles. Perchlorate has been
found in the drinking water, groundwater, surface water, or soil
in 35 states, the District of Columbia, and 2 commonwealths of
the United States. Exposure to perchlorate affects the human
thyroid, and certain levels of exposure may result in
hyperthyroidism in adults and developmental delays in children.
Although there is no specific federal requirement to clean up
perchlorate, the Environmental Protection Agency (EPA) and state
regulatory agencies have used various environmental laws and
regulations to require cleanup of perchlorate by responsible
parties. Between 1942 and 1945, new military uses for perchlorate
led to an increase in the production of perchlorate in the United
States. Between 1945 and 1967, the U.S. Navy, Western
Electrochemical Company, and the American Potash and Chemical
Company manufactured perchlorate at a facility in Henderson,
Nevada. The United States owned part of the facility from 1953 to
1962. In 1967, the Kerr-McGee Corporation acquired the facility
and continued to manufacture perchlorate until 1998, when it
ceased production after the chemical was found in nearby
groundwater. Kerr-McGee is presently cleaning up perchlorate
contamination under a consent order with the Nevada state
environmental agency. The American Pacific Corporation also
manufactured perchlorate near Henderson from 1958 until 1988,
when its facility was destroyed in an explosion. American Pacific
relocated its perchlorate production to Utah and is currently the
sole manufacturer of perchlorate in the United States. In a
recent letter to GAO, Congress asked us to report on the costs,
liability and financial responsibility related to perchlorate
cleanup. The issue of liability for perchlorate cleanup is
currently the subject of litigation between the Kerr-McGee
Corporation and the United States. In 2000, Kerr-McGee initiated
litigation against the United States, seeking reimbursement for
cleanup costs. The case is still in the pretrial stage. The
information requested above is among the issues being addressed
as part of the pending court case. It is a longstanding GAO
policy to refrain from taking a position on or addressing matters
that are pending in litigation. During a June 2005 meeting with
Congressional staff, we agreed to document why we could not
undertake the study originally requested, and we also agreed to
report on general issues relating to the federal government's
responsibility for environmental cleanup on land that it
transfers or sells to other parties. This report discusses (1)
laws governing the transfer of contaminated federal property to
private parties, both before and after the enactment of a 1986
amendment to the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980 (CERCLA) that
specifically governs such transfers, and (2) the degree to which
private parties not subject to civil actions under CERCLA may
seek environmental cleanup costs from other responsible parties
in the wake of the recent Supreme Court decision in Cooper
Industries v. Aviall Services, and subsequent cases.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-05-1011R
ACCNO: A37277
TITLE: Environmental Cleanup: Transfer of Contaminated Federal
Property and Recovery of Cleanup Costs
DATE: 09/16/2005
SUBJECT: Chemical agents
Chemical exposure
Federal law
Federal property
Federal regulations
Hazardous substances
Health hazards
Land transfers
Liability (legal)
Policy evaluation
Reporting requirements
Environmental cleanups
Reimbursements
******************************************************************
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GAO-05-1011R
* PDF6-Ordering Information.pdf
* Order by Mail or Phone
United States Government Accountability Office Washington, DC 20548
September 16, 2005
The Honorable James M. Inhofe Chairman, Committee on Environment and
Public Works United States Senate
Subject: Environmental Cleanup: Transfer of Contaminated Federal Property
and Recovery of Cleanup Costs
Dear Mr. Chairman:
Ammonium perchlorate (perchlorate) is a primary ingredient in solid rocket
propellant and has been used for decades by the Department of Defense
(DOD), the National Aeronautics and Space Administration, and the defense
industry in the manufacturing, testing, and firing of rockets and
missiles. Perchlorate has been found in the drinking water, groundwater,
surface water, or soil in 35 states, the District of Columbia, and 2
commonwealths of the United States. Exposure to perchlorate affects the
human thyroid, and certain levels of exposure may result in
hyperthyroidism in adults and developmental delays in children. Although
there is no specific federal requirement to clean up perchlorate, the
Environmental Protection Agency (EPA) and state regulatory agencies have
used various environmental laws and regulations to require cleanup of
perchlorate by responsible parties.
Between 1942 and 1945, new military uses for perchlorate led to an
increase in the production of perchlorate in the United States. Between
1945 and 1967, the U.S. Navy, Western Electrochemical Company, and the
American Potash and Chemical Company manufactured perchlorate at a
facility in Henderson, Nevada. The United States owned part of the
facility from 1953 to 1962. In 1967, the Kerr-McGee Corporation acquired
the facility and continued to manufacture perchlorate until 1998, when it
ceased production after the chemical was found in nearby groundwater.
Kerr-McGee is presently cleaning up perchlorate contamination under a
consent order with the Nevada state environmental agency. The American
Pacific Corporation also manufactured perchlorate near Henderson from 1958
until 1988, when its facility was destroyed in an explosion. American
Pacific relocated its perchlorate production to Utah and is currently the
sole manufacturer of perchlorate in the United States.
In your recent letter to GAO, you asked us to report on the following:
ernment's defense and space programs, either directly through prime
contracts or indirectly through subcontracts under prime contracts?
production equipment,
and subsidization of plant capacity expansions?
he United States, seeking
reimbursement for cleanup costs. The case is still in the pretrial stage.
The information you requested above is among the issues being addressed as
part of the pending court case. It is a long-standing GAO policy to
refrain from taking a position on or addressing matters that are pending
in litigation.
During a June 2005 meeting with your staff, we agreed to document why we
could not undertake the study you originally requested, and we also agreed
to report on general issues relating to the federal government's
responsibility for environmental cleanup on land that it transfers or
sells to other parties. This report discusses (1) laws governing the
transfer of contaminated federal property to private parties, both before
and after the enactment of a 1986 amendment to the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980 (CERCLA)
that specifically governs such transfers, and (2) the degree to which
private parties not subject to civil actions under CERCLA may seek
environmental cleanup costs from other responsible parties in the wake of
the recent Supreme Court decision in Cooper Industries v. Aviall Services,
and subsequent cases. In conducting our work, we examined statutes and
regulations governing the cleanup and transfer of contaminated federal
property. We also researched and analyzed court cases addressing the
degree to which private parties may recover the costs they incur in
cleaning up contaminated properties.
Three Principal Federal Laws Govern the Transfer of Contaminated Federal
Property to Private Parties
While there are numerous laws that have some impact on the transfer of
contaminated federal property to private parties, 1 the following three
federal statutes (and associated regulations) specifically require some
combination of cleanup actions, notice of contamination, and retained
federal cleanup responsibility following transfer of the property:
o Federal Property and Administrative Services Act of 1949 (Federal
Property Act
o Comprehensive Environmental Response, Compensation, and Liability Act
of 1980 (CERCLA)
o Superfund Amendments and Reauthorization Act of 1986 (SARA
Under the Federal Property Act, each federal agency has a continuing
responsibility to identify property that has become excess-no longer
needed by the agency to carry out its programs or activities. The agency
must report such property to the General Services Administration (GSA).
GSA then must determine if any other federal agency, mixed-ownership
government corporations, 2 or the District of Columbia has a need for the
property. If no other agency needs the property, GSA declares it unneeded
by the government and identifies it as surplus. Generally, surplus
property must be disposed of after publicly advertising for bids.
Regulations under the Federal Property Act have long recognized the
importance of decontaminating federal property prior to transfer, but the
regulations were initially drafted in very general terms and provided no
specific procedures for ensuring compliance. For example, since 1964, GSA
regulations have required any agency reporting excess property that is
dangerous or hazardous to health and safety to state the extent of such
contamination, the plans for decontamination, and the extent to
1
For a comprehensive list of statutes affecting federal property transfers,
including environmental statutes, see GAO, Real Property Dispositions:
Flexibility Afforded to Meet Disposition Objectives Varies,
GAO/GGD-92-144FS (Washington, D.C.: Sept. 18, 1992).
2
Mixed-ownership corporations include such entities as the Federal Deposit
Insurance Corporation and the Federal Home Loan Banks.
which the property could be used without further decontamination. 3 The
1964 regulations made the landholding agency responsible for all expense
to the government and for supervising the decontamination of excess and
surplus property under the agency's jurisdiction. The regulations required
the agency to inform GSA of any hazards related to such property "in order
to protect the general public from such hazards and to preclude the
government from any and all liability resulting from indiscriminate
disposal or mishandling of contaminated property." However, the
regulations did not specifically oblige the government to transfer the
property free of contamination, notify the transferee of the
contamination, or provide any procedures for making claims against the
government in the event the property was contaminated. In addition, any
potential legal action against the government would have been impeded by
the federal government's sovereign immunity. 4
CERCLA established the Superfund program to clean up highly contaminated
hazardous waste sites. 5 CERCLA authorizes EPA to compel parties
responsible for the contamination to clean up the sites; allows EPA to pay
for cleanups and seek reimbursement from responsible parties; and
establishes a trust fund (known as the Superfund) to help EPA pay for
cleanups and related program activities. 6 The law also allows responsible
parties who have undertaken efforts to clean up properties contaminated by
hazardous substances to seek contribution from other parties liable under
CERCLA for cleanup costs incurred.
CERCLA established that past owners or operators of contaminated property,
including the U.S. government, may be held responsible for the
contamination. The law waived the federal government's sovereign immunity,
providing that each agency shall be subject to and must comply with the
act in the same manner and to the same
3
The 1964 regulations defined "decontamination" to mean "the complete
removal or destruction by flashing or explosive powders; the neutralizing
and cleaning out of acid and corrosive materials; the removal, destruction
or neutralizing of toxic or infectious substances; and the complete
removal and destruction by burning or detonation of live ammunition from
contaminated areas and buildings." 41
C.F.R. S: 101-47.103-5 (1964). This definition remains the same today. 41
C.F.R. S: 102-71.20 (2004). Current GSA regulations contain more detailed
provisions governing the decontamination of property to be transferred out
of federal ownership, much of which reflects the language of section
120(h) of CERCLA, which we discuss in more detail below. See, for example,
41 C.F.R. S: 102-75.125 (property title report must include a statement
indicating whether any hazardous substance activity took place during the
time that the property was owned by the United States); 41 C.F.R. S:
102-75.340(b) (property conveyance document must include a statement that
the government has taken all cleanup action necessary to protect human
health and the environment); and 41 C.F.R. S: 102-75.955 (landholding
agency is responsible for supervising decontamination of excess and
surplus real property that has been contaminated with hazardous materials
of any sort).
4
Absent a statutory waiver, sovereign immunity shields the federal
government and its agencies from suit. For example, Department of Army v.
Blue Fox, 525 U.S. 255, 260 (1999).
5
EPA places the nation's most seriously contaminated sites, which typically
are expensive and can take many years to clean up, on its National
Priorities List (NPL). EPA uses its Hazard Ranking System, a numerical
scoring system that assesses the hazards a site poses to human health and
the environment, as the principal mechanism for determining which sites
are eligible for placement on the NPL.
6
In addition, the law establishes a process for cleaning up hazardous waste
at federal facilities, although the Superfund trust fund is generally not
available to fund these federal cleanups, which are funded from federal
agency appropriations.
extent, both procedurally and substantively, as a nongovernmental entity,
including with regard to liability. As a result of the sovereign immunity
waiver and CERCLA's broad definition of liability, the government has in
some instances been held liable under CERCLA for cleanup costs at
properties that are privately owned.
Court cases assessing whether the federal government is liable for cleanup
costs have engaged in fact-intensive inquiries. For example, in FMC v.
Department of Commerce, a federal appellate court held that the federal
government had substantial control over a facility producing war-related
products during World War II because, among other things, the government
determined what product the facility would manufacture and controlled the
supply and price of the facility's raw materials and, thus, could be
considered operator of the facility under CERCLA. 7 However, in East Bay
Municipal Utility District v. U.S. Department of Commerce, a federal
appellate court held that the federal government did not exercise actual
control over operations at a zinc mine during World War II, so as to
render it liable as an operator, even though it imposed price and labor
restrictions intended to protect its efforts to acquire zinc for munitions
production, provided financial backing for the mine and, entered into an
output contract with the mine8.
In 1986, Congress passed SARA which amended CERCLA and contained
provisions authorizing, and in some cases requiring, the cleanup of
federal property prior to its transfer into private hands. Specifically,
the law added section 120, which established a program for cleaning up
federal facilities, including section 120(h), which governs the transfer
of certain contaminated federal property.
Under section 120 of CERCLA, EPA must, where appropriate, evaluate
hazardous waste sites at federal facilities to determine whether the waste
sites qualify for inclusion on the National Priorities List, which is
EPA's list of the nation's most serious hazardous waste sites. For each
facility listed on the National Priorities List, section 120(e)(2) of
CERCLA requires the landholding agency to enter into an interagency
agreement with EPA for the completion of all necessary remedial actions.
The interagency agreement must include, among other things, the selection
of and schedule for the completion of the remedial actions.
Moreover, section 120(h)(3) requires that the federal government include
in any deed transferring property to a private party after October 16,
1990, a covenant warranting that
7
29 F.3d 833, 843 (3d Cir. 1994). Also see, FMC v. Department of Commerce,
786 F.Supp. 471, 486
(E.D. Pa. 1992) (federal government ownership of installations, equipment,
and pipelines associated with a high-tenacity rayon plant made the
government liable as an owner for cleanup costs); E.I. Dupont de Nemours
v. United States, 365 F.3d 1367, 1372 (Fed. Cir. 2004) (federal government
was liable for CERCLA costs under an open-ended contract indemnification
clause in the contract with the owner and operator of the ordnance plant).
8
142 F.3d 479, 484-85 (D.C. Cir. 1998).
(i)
all remedial actions necessary to protect human health and the
environment with respect to any hazardous substance remaining on
the property have been taken before the date of transfer and
(ii)
any additional remedial action found to be necessary after the
date of such transfer shall be conducted by the United States. 9
Section 120(h)(3) only applies to federal property on which hazardous
substances were (a) stored for 1 year or more, (b) known to have been
released, or (c) disposed of. Thus, some contaminated federal properties
are not covered by section 120(h)(3). For example, because the definition
of hazardous substance excludes petroleum, those properties contaminated
solely with petroleum would not be covered.
Section 211 of SARA established the Defense Environmental Restoration
Program that requires DOD to identify, investigate, and clean up
environmental contamination and other hazards at active and closing
installations as well as formerly used defense sites. 10 DOD's policies
for administering cleanup programs are outlined in its guidance for
managing its environmental restoration program and generally follow the
CERCLA process for identifying, investigating, and remediating sites
contaminated by hazardous substances.
Parties Who Carry Out Voluntary Cleanups Have Limited Ability to Recover Cleanup
Costs
Courts have interpreted the liability of responsible parties under CERCLA
to be joint and several. Under joint and several liability, when the harm
done is indivisible, one party can be held responsible for the full cost
of the cleanup, even though that party may be responsible for only a
portion of the hazardous substances at the site. Such a party may then
seek to recover a portion of its cleanup costs from other responsible
parties. However, a recent Supreme Court decision has limited the ability
of responsible parties who voluntarily clean up their property to recover
costs from other responsible parties under CERCLA 11
Between 1980 and 1986, several courts held that a voluntary party-that is
a private party that has incurred cleanup costs, but that has done so
voluntarily and is not itself subject to suit under CERCLA-could seek to
recover some of those cleanup costs from other parties under section
107(a), which is the CERCLA provision that establishes cleanup liability.
12 In 1986, CERCLA was amended to include a specific
9
42 U.S.C. S: 9620(h)(3)(B). Section 120(h) also requires the government to
notify potential buyers of all known hazardous substances on the property.
42 U.S.C. S: 9620(h)(3)(A).
10
A formerly used defense site is a property that DOD formerly owned,
leased, possessed, operated, or otherwise controlled, and that was
transferred from DOD prior to October 17, 1986.
11
In this report, we refer to such parties as "voluntary parties."
12
See, for example, Wickland Oil Terminals v. Asarco, Inc., 792 F.2d 887,
890-892 (9th Cir. 1986); and Philadelphia v. Stepan Chemical Co., 544
F.Supp. 1135, 1140-1143 (E.D. Pa. 1982). In this report, we also use the
term "voluntary party" to refer to parties subject to enforcement action
under statutes other than CERCLA, such as parties compelled to clean up
their facilities under state hazardous waste programs under the Resource
Conservation and Recovery Act.
action for "contribution," codified as section 113(f) of CERCLA. 13
Section 113(f)(1) states that "any person may seek contribution from any
other person who is liable or potentially liable under section 107(a) of
this title, during or following any civil action" under CERCLA. 14
In 2004, the Supreme Court in Cooper Industries v. Aviall Services held
that this statutory language prohibits a voluntary party from seeking
contribution from another responsible party. 15 The plaintiff in Aviall,
Aviall Services, purchased an aircraft maintenance business from the
defendant, Cooper Industries, and continued operating the business for a
number of years. When Aviall Services learned that it and Cooper
Industries had polluted the site, Aviall Services notified the Texas state
environmental agency. The state then instructed Aviall Services to clean
up the site under the threat of an enforcement action. Aviall Services
cleaned up the site and then filed suit against Cooper Industries under
section 113(f)(1), seeking contribution. Since Texas did not take formal
enforcement action against Aviall Services, its cleanup action is
considered to be voluntary.
In reversing a lower court decision, the Supreme Court held that Aviall
Services was not entitled to seek recovery under section 113(f)(1) because
Aviall Services had not been sued under CERCLA. The Court focused on the
language in the provision stating that "any person may seek contribution .
. . during or following any civil action" under CERCLA. 16 The Supreme
Court explained that reading the statute to allow contribution claims to
occur in the absence of such an action at any time would render the
italicized language superfluous.
After the Court's decision in Aviall, voluntary parties have instead
sought contribution from other responsible parties under section 107(a),
which had previously been used in some cases before the enactment of
section 113. However, a majority of district courts confronting the issue
since Aviall have held that voluntary parties may not pursue contribution
actions against other responsible parties under section 107. For example,
in Mercury Mall Associates v. Nick's Market, the district court held that
section 113(f) provided the only avenue for a responsible party to seek
cleanup costs from another. 17 The court noted that in a pre-Aviall case,
the Fourth Circuit had held that section 113(f) was the only CERCLA
provision under
13
Section 113(f)(1) provides in full as follows: "Any person may seek
contribution from any other person who is liable or potentially liable
under section 107(a) of this title, during or following any civil action
under section 106 of this title or under section 107(a) of this title.
Such claims shall be brought in accordance with this section and the
Federal Rules of Civil Procedure, and shall be governed by Federal law. In
resolving contribution claims, the court may allocate response costs among
liable parties using such equitable factors as the court determines are
appropriate. Nothing in this subsection shall diminish the right of any
person to bring an action for contribution in the absence of a civil
action under section 106 of this title or section 107 of this title."
14
Section 113(f)(3)(B) provides that a party who has resolved its cleanup
liability in a settlement with the federal government or a state
government may also seek contribution from other responsible parties who
have not settled.
15
125 S. Ct. 577 (2004).
16
125 S. Ct. 583 (emphasis added).
17
368 F. Supp. 513 (E.D. Va. 2005).
which one responsible party could sue another, and that nothing in the
Aviall case had changed that result. However, the court also observed that
leaving voluntary parties without a remedy against other responsible
parties "seems to undermine the twin purposes of the statute, which are to
promote prompt and effective cleanup of hazardous waste sites and the
sharing of financial responsibility among the parties whose actions
created the hazard." 18
In contrast, a few courts have held that voluntary parties may continue to
recover costs from other parties under section 107. For example, in Vine
Street LLC v. Keeling, the court held that the current owner of a
contaminated lot could maintain a claim against another potentially
responsible party (in this case, a chemical company) under section 107,
despite the fact that the current owner was also a potentially responsible
party. 19 The court explained that section 107 specifically authorizes
voluntary parties to seek costs from other responsible parties, while
section 113(f) created a separate cause of action, allowing parties that
have been subject to cost recovery actions to allocate liability among
themselves.
No federal appellate courts have ruled on this issue since Avill, 20
making it difficult to determine the case's impact on voluntary cleanup
activities. The Aviall decision may complicate efforts to clean up
contaminated properties by providing a disincentive for parties to
voluntarily carry out such cleanups. On the other hand, the decision may
provide an incentive for parties to settle their CERCLA liability with the
federal government since parties who enter into an administrative or
judicially approved settlement with the government may obtain contribution
under CERCLA. Nonetheless, as the court in Mercury Mall observed, the
result of the Aviall decision is not likely to facilitate the prompt and
effective cleanup of contaminated properties.
As agreed with your office, we plan no further distribution of this report
until 30 days after the date of this report. At that time, the report will
be available on GAO's home
18
368 F. Supp. 513, 519.
19
362 F. Supp.2d 754, 760 (E.D. Tex. 2005).
20
In dictum, the United States Court of Appeals for the Tenth Circuit in
Young v. United States, 394 F.3d 858, 862 (10th Cir. 2005), indicated that
a pre-Aviall Tenth Circuit case that restricted responsible party
contribution claims to section 113(f) remained the controlling precedent.
page at http://www.gao.gov. If you have any questions, please contact me
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Sincerely yours,
Director, Natural Resources and Environment
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